Analysis

REMIT and the Energy Law – Important Changes

REMIT and penalties for non-compliance with obligations 

Legal Alert (15/2015)

As from October, the REMIT reporting obligation and the amended energy law imposing administrative and penal sanctions for non-compliance with the REMIT obligations will enter into force.

In the upcoming months, energy companies and some consumers will be affected by material changes related to their participation in the electricity and natural gas market. First, the aforesaid entrepreneurs and consumers will be subject to new obligations arising from REMIT[1]. Second, at the close of the legislative process initiatives are planned with a view to amending the Energy Law[2] to impose administrative and penal sanctions for non-compliance with the REMIT obligations.

The obligation to report commodity exchange transactions will be imposed in 2015.

The obligation to report energy products related to electricity and gas sold on the wholesale market through organized trading platforms will enter into force on 7 October 2015, and the one related to OTC transactions on 7 April 2016.

The obligation to report energy product transactions entered into both on the organized and the OTC market is another mechanism, in addition to the obligation to publish inside information, the prohibition on using inside information and the prohibition on market manipulation, introduced with a view to enhancing the transparency of the electricity and natural gas market.

Market participants (to include energy sellers, producers, final consumers of energy with the consumption capacity of 600 GWh/year or more, transmission network operators, distribution network operators, entities transporting natural gas, storage system operators and specific investment companies) will be obliged to report detailed data on energy product contracts concluded to ACER[3], an EU agency. The reporting obligation may be discharged by the market participant itself or through another entity (such services will be provided by Towarowa Giełda Energii S.A. (Polish Power Exchange) for commodity exchange transactions).

What is important, prior registration in a dedicated register maintained by the Energy Regulatory Office in Poland is a necessary condition for fulfilment of the aforesaid reporting obligation.

The amended energy law and REMIT sanctions

As expected, the amended Energy Law imposing sanctions for a failure to comply with REMIT as well as granting the right of control to the President of the Energy Regulatory Office will enter into force during the first weeks of fall in 2015.

Two kinds of sanctions, namely administrative and penal ones, will be imposed under the amended law.

Administrative penalties, which may be levied, for instance, for a failure to publish inside information, to report data on transactions entered into on wholesale energy markets to ACER or for reporting untrue or incomplete data, provision of untrue data on the capacity and use of facilities for production, storage or transmission of electricity or natural gas, or consumption of electricity or natural gas, and LNG facilities, may be as high as PLN 1,000,000.00.

Under penal provisions, a person who manipulates the market or uses inside information by purchasing or selling energy products sold on the wholesale market may be subject to imprisonment (up to 8 years), limitation of freedom or a fine (up to PLN 5,000,000.00).

REMIT – who will exercise the right of control?

The right of control whether REMIT obligations have been fulfilled will be conferred on the President of the Energy Regulatory Office. As part of the control mechanism, the controllers will be granted a wide scope of authorizations to access any documents, enter the premises of the company or demand verbal explanations. Considering the potential severe sanctions for non-compliance with REMIT and the right of control that may be exercised by the President of the Energy Regulatory Office in numerous circumstances, the entrepreneurs affected by REMIT are not only interested in ensuring compliance with the new legislation but they also focus on verification of those REMIT provisions which have already entered into force.

 

 

[1] Regulation (EU) No 1227/2011 of the European Parliament and of the Council of 25 October 2011 on wholesale energy market integrity and transparency

[2] The draft amendments have been published as paper no 3590 (http://www.sejm.gov.pl/Sejm7.nsf/PrzebiegProc.xsp?nr=3590)

[3] Agency for the Cooperation of Energy Regulators

 

 

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